What is Dollar-Cost Averaging vs. Lump Sum Investing: What's Best for Your Investment Portfolio?

Investment Choices

Dollar-cost averaging (DCA) is an investment strategy that involves investing a fixed amount of money into an asset over a set period of time, regardless of the asset's price fluctuations. For example, if you invest $1,000 per month into a mutual fund, you're using a dollar-cost averaging strategy.

The idea behind the DCA strategy is to reduce the impact of short-term market volatility on your investment returns. By investing a fixed amount of money over time, you buy more shares when prices are low and fewer shares when prices are high. This tends to help smooth out your investment returns over the long term.

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